4 Mistakes New Investors Should Avoid in a Bear Market

There’s been a lot of turbulence on Wall Street lately. As the Fed hikes interest rates and the cryptocurrency markets redefine volatility, all major market indexes have suffered the consequences.

For many retail investors, or even people who have just started their retirement planning in the last several years, this is unfamiliar territory—and they’re not entirely sure how best to proceed. Here’s the good news: This isn’t the first time the markets have gone real wonky real fast. And they’ve always recovered.

That might be little comfort, though, as you see the balance of your portfolio dwindle. But acting too rashly could make things worse. Here are the most common mistakes new investors are likely to make. Your job? Don’t follow in their footsteps.

Mistake #1: Doing Too Much

While it’s not a bad thing to monitor your accounts, doing it too often can give you a case of FOMO, especially when the market has a temporary bounce. You might feel the need to do something, when the best thing to do is…nothing.

“As far as how often you should be rebalancing your accounts, many would say that 1-2 times per year is plenty,” says Joe Allaria of CarsonAllaria Wealth Management. “I can only imagine how much less stress investors would feel if they only checked their accounts 1-2 times per year.”

Focus on long-term potential instead of short-term returns, assuming you’re investing for the future. Keep in mind that $1 invested in 1970 was worth $68 in 2018. The more discipline you show, the more the markets will reward you.

Mistake #2: News Overconsumption

News, in and of itself, is not a bad thing. But consuming it nonstop as markets spiral can lead to fear, which will almost certainly lead to bad decision-making. Some outlets will lean towards sensationalism for ratings or pageviews, and even the ones that don’t could spook you.

That’s especially true of programs that highlight pundits, who lean into hype and, in some instances, are looking to reap benefits themselves. They might be expert investors, but their goals are not the same as yours. If you want to get someone’s advice, meet with a certified financial planner, who will take the time to learn what you hope to do with the money you’re investing and help you plot a course of action.

Mistake #3: Focusing on the Short-Term

In a down market, new investors tend to focus on the year-to-date returns. The one-year and (depending on the length of the overall downturn) three-year might be less than heartening as well. Those can mislead you, however. An average annualized return, using 10-years or more as a baseline, can give you a truer look at how a fund has performed.

Investing is more about waiting than it is buying. When in doubt, remember the words of Charlie Munger, vice chairman of Berkshire Hathaway: “Waiting helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.”

Mistake #4: Not Diversifying

Retail investors are often drawn to the stock market, as it’s a bit sexier than other investment vehicles. But if you’re putting all of your eggs in one basket, you’re likely to face disappointment eventually. Diversification doesn’t have to mean bonds; it can also include mutual funds or exchange-traded funds (ETFs). These are collections of stocks, picked by experts, that have a wide variety of holdings, ideally giving you a bit of a net should things go south quickly.

For those of you who are new to investing, be sure to check out our Smart Investing section, which has a ton of resources and expert insights for anyone looking to learn more about investing. Some articles you may find helpful:

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.